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Thursday, January 24, 2013
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The Supreme Court, Takings, and Environmental Protection

By Josh Galperin, Associate Director

 

20 years ago, along State Road 50 in Orange County, Florida, land developer Coy Koontz proposed to fill 3.7 acres of wetlands in order to build a commercial center. At the time, the local water management district agreed to permit the project if Mr. Koontz would agree to preserve the remaining 11 acres of wetlands on his property and, in order to further mitigate the wetlands he would fill, to contribute approximately $10,000 to improve a separate wetland preserve several miles away. Mr. Koontz refused this arrangement, as well as several others proposed by the district, and instead sued, claiming that the district’s refusal to issue him an unconditional permit constituted an impermissible government taking of his property without just compensation, in violation of the Fifth Amendment to the U.S. Constitution. 
 
Over the last two decades, despite Mr. Koontz’ death, this case found its way from the wetlands of central Florida to the United States Supreme Court, with Mr. Koontz’s son, Coy Koontz, Jr., taking over for his father.
 
The environmental implications of this particular case are clear: Wetlands, which are sometimes called the “kidneys” of watersheds for their water purification functions and which also provide important wildlife habitats, are an essential environmental resource and this case involves the question of when and how Mr. Koontz can destroy wetlands on his property. However, the really interesting aspects of this case are in the details of the legal theory.
 
I. The Takings Clause of the Fifth Amendment
 
Mr. Koontz claimed that by failing to issue him a development permit, the government had “taken” his property. Among other things, the Fifth Amendment to the United States Constitution says “nor shall private property be taken for public use, without just compensation.”  This means that the government may take private property from individuals on two conditions. First, the government may take the property only for a public use, such as a road, a school, or environmental protection. Second, when the government does take private property for public use, it must offer the property owner compensation for the land taken.
 
A. Taking by Eminent Domain
 
Over the years this constitutional clause has given rise to several distinct types of takings. Eminent domain is the most traditional means of taking private property for public use. With eminent domain, the government will go to a court and tell the court that it wants to take ownership of private land. As long as the purpose of the eminent domain is public and the compensation is fair, the court will transfer ownership from the private owner to the government. 
 
B. Taking by Regulation
 
A regulatory taking is an alternative method of taking private property. This occurs when the government does not plan or intend to take ownership of private property, as it does with eminent domain, but instead regulates the property owners’ use of his or her property to such an extent that the government is essentially forcing the property into public use. For example, where a state regulation prohibited a mining company from extracting any coal that was under a residential building because mining would cause the building to collapse, the Supreme Court ruled that there had been a regulatory taking. The Court found that the regulation prohibited the company from using part of its property and that the state, in an effort to protect private homes from coal mining, had gone “too far”. [1]   
 
A later Supreme Court case helped explain, but did not completely resolve, how to determine when a regulation goes too far. In this later case, the Court developed what is now called the Penn Central test, which says that whether there is a regulatory taking depends on: (1) the economic impact of the regulation; (2) the extent to which the regulation interferes with distinct, investment-backed expectations of the property owner; and (3) the character of the government action. [2]  Unfortunately, in the nearly 40 years since the Court laid out the Penn Central test, it is still unclear exactly how to interpret and apply the details.
 
Some regulatory takings, however, are easy to identify because they are categorical. That is, they involve much less balancing and judgment. When a government regulation forces a permanent invasion of property, no matter how small that invasion, it is a taking, as was the case when a regulation forced building owners to allow cable companies to run wire across their roofs. [3] Likewise, when a regulation completely removes any private economic benefit of property, that is a  “total taking” and the Constitution requires compensation. For example, a South Carolina law required a special permit to develop in a critical coastal area. When the government would not issue a permit to a beachfront property owner, the Supreme Court said that stopping development is permissible, but as long as the government requires the landowner to preserve his property for public environmental purposes, it must pay him just compensation. The court explained that by denying the permit, the government denied the landowner any economically beneficial use of his land. In other words, where a regulation causes property to have only a public benefit, and no benefit to the private landowner, there has been total taking. [4]  
 
C. Taking by Exaction
 
Finally, there is a category of taking called an exaction. An exaction occurs when the government conditions issuance of a development permit on the developer giving up some smaller piece of property. Where a homeowner wants to build a new beachfront house, but the government will only issue a permit if the homeowner allows pedestrians to cross his property; that is an exaction. It is a taking of the small piece of property across which the pedestrians will walk. [5]  And if a hardware store wants to expand its parking lot but the government will only issue a permit if the storeowner gives up a portion of her property for a bike path, that too is an exaction. It is a taking of the land that will become a bike path. [6] 
 
Not all permit conditions, however, are exactions. First, to be an exaction, such a condition must require the dedication of property to public use. Second, a permit condition is permissible and is not a taking if the condition is closely related to the harm that that the permitted action will cause. The condition must be related in both its nature and its size. For example, when the beachfront homeowner builds a new home, that development has nothing to do with pedestrian beach access, so the pedestrian crossing does not have what the Supreme Court calls an “essential nexus” with the new development. [7] In contrast, a storeowner expanding her parking lot, does have a connection with traffic and commuting, so a bike path across the property does have an essential nexus. However, according to the Court, the traffic impact of a few additional parking spots is insignificant and is not weighty enough to warrant the dedication of private property for a bike path. The Court calls this test one of “rough proportionality”; the impact of requiring the landowner to establish a bike path is not roughly proportional to the impacts of the parking lot.   
 
At first, because the case of Coy Koontz is about permit conditions, it appears to concern only this last category of takings: exactions. But in fact, the case raises questions about the broad spectrum of takings law. 
 
II. Takings in the Context of Koontz
 
A. Has There Been an Exaction?
 
For the sake of argument, the Supreme Court might take the facts of Mr. Koontz’s case and decide that there is an exaction. They would of course look at the requirement that Mr. Koontz dedicate his undeveloped wetlands for preservation and that he contribute money to the preservation of additional wetlands and the Court would have to agree that there is an essential nexus between wetland destruction and wetlands preservation. However, they might decide that the harm done by filling a few acres of wetlands is not roughly proportional to the requirement of preserving and paying for so many additional acres.  Under this reasoning the Court could decide that there has been an exaction and that compensation is due 
 
In the exaction cases described above, the owners sued the government after the government issued permits requiring dedication of the walking path beside the beachfront home and the bike path next to the hardware store. But in this case Koontz sued the government for denying his permit. Because the government never issued a permit, there was no requirement forcing Koontz to do anything with his money or wetlands. The government never forced Koontz to dedicate his property to the public good. Thus, as Mr. Koontz sues, seeking compensation for the exactions, the Court cannot ignore the fact that there never was an exaction, the government cannot compensate for something it has not taken, or for a requirement that does not exist.
 
When the Supreme Court listened to arguments in this case Justice Sotomayor listened to Koontz’s explanation of this case and found herself wondering, “Why are we even in this case? Why are we here?” Justice Scalia, often the greatest champion of strict property rights, expressed the same concern, pointing out that the government never took anything in this case. Given the skepticism of the Court, it seems that Koontz’s exaction theory may fail. 
 
But perhaps other takings theories could rescue this case. Realistically, Mr. Koontz’s presented his case to the Supreme Court only on the exaction argument, so it is doubtful that the Court would address other theories. However, in the past decades and already this term, the Court has been inclined to rule in favor of complaining landowners, so an exploration of Koontz’s other constitutional and policy options is worthwhile.
 
B. Other Takings Theories
 
Mr. Koontz might argue that there has been a regulatory taking insofar as the government has denied Mr. Koontz all use of his land for commercial development. This argument has previously prevailed before the Court, as was the case, mentioned above, of the South Carolina landowner who was denied a permit to build on his beachfront property. However, in that case the Supreme Court considered the permit denial to be a regulatory taking because it left the landowner without any reasonably beneficial economic use of his land. That simply is not the case for Mr. Koontz. Coy Koontz can still build an economically significant commercial development on his property. Admittedly, Mr. Koontz can only build this development if he is also willing to preserve and improve various wetlands at what may be a non-negligible cost to him. But the economic opportunity to develop the parcel even with the proposed restrictions is also very real, and an argument that there has been a complete loss of value rather than only a partial reduction in value is unsound. 
 
Mr. Koontz might then argue that there has been a regulatory taking under the three-part Penn Central test. This argument also faces an uphill battle. The Court might find, for example, that when the government denies a permit because the landowner is not willing to accept conditions, that the “character of the government action”, specifically, the possibly extortionate conditions, should lead to a regulatory taking and compensation.  On the other hand, the conditions probably do not have a major economic impact compared to the value of the proposed development, nor do the conditions interfere with Koontz’s investment-backed expectations because he still stands to make a significant profit on the development, regardless of the conditions. More importantly, the Supreme Court has never found a regulatory taking under the Penn Central test. 
 
Koontz’s final argument might then fall from a constitutional argument to a policy argument. It is unfair, he might argue, that he must choose between what he sees as the lesser of two evils. He can refuse, as he did, to accept the permit conditions and the government will deny the permit, but then he cannot win on the constitutional merits. If he wants to succeed on a constitutional exactions argument he will have to concede to a permit with conditions he does not like and then sue the government as the beachfront homeowner or the hardware store owner did.  Koontz’s policy argument would be that he should not have to wait for an unconstitutional act in order to get his justice. But this argument should also fail because it sets up a false dichotomy.  
 
Mr. Koontz would want the court to sympathize with his untenable situation. Either he accepts an unconstitutional permit or he stands up for his principal but is then prohibited from getting justice. The flaw in this argument is that even if there were an exaction in this case, an exaction is not unconstitutional. Takings in general are not unconstitutional; they merely require compensation. This is the very purpose of the Takings Clause of the Fifth Amendment. The government may take property, whether by eminent domain, regulatory takings or exactions, as long as the government pays compensation. If Mr. Koontz were faced with a permit that denied his freedom of speech or religion, then his choice would raise constitutional sympathies. When his choice is between making a lot of money or making a lot of money and spending a little to protect the environment, the Constitution does not prohibit permit conditions.
 
III. Takings and Environmental Protection
 
Through the Takings Clause, the United States Constitution strikes a balance between a severe and inflexible purity of private property and the logical inevitability that in democratic society property owners must, to some degree, consent to limited governmental interference.  Although this is the consensus embodied in the Fifth Amendment it is not welcome to strict property rights advocates. 
 
The alternative is not a welcome to environmental protection advocates. Whether it is wetlands or coalmines, flood protection or toxic remediation, environmental safeguards frequently bear on the private use of land. If the Court is to further expand the scope of the Takings Clause, the requirement of compensation could make environmental protection impractically expensive. Koontz v. St. Johns River Water Management District presents the Court with an opportunity to reject a further broadening of the scope of takings law and to avoid putting environmental safeguards—already in political jeopardy—in greater legal and economic jeopardy.  
 
_________________________________________________________________
 [1] Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922).
 [2] Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978).
 [3] Loretto v. Teleprompter Manhattan CATV Corp., 548 U.S. 419 (1982).
 [4] Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992).
 [5] Nollan v. California Coastal Commission, 482 U.S. 825 (1987).
 [6] Dolan v. City of Tigard, 512 U.S. 374 (1994).
 [7] Nollan v. California Coastal Commission, 482 U.S. 825 (1987).
 [8] Dolan v. City of Tigard, 512 U.S. 374 (1994).
 
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